Buyer closes on distressed property with renovation loan

Mortgage lender: James Forte

Property type: Single-family house in Danbury

Purchase price: $ 210,000

Borrowing amount: $ 230,743

Loan type: 30-year fixed Federal Housing Administration 203K

Rate: 4.75 percent

Background: The borrower was a local factory worker, who like many prospective buyers, had been looking for that diamond in the rough foreclosure that could be bought for less than market value.

He finally found the deal and even sweeter, it was not a foreclosure. The situation was the house was in decent shape but it needed a new septic system. The seller could not afford the $ 25,000 installation before selling.

Due to this situation, the seller was willing to sell the home for a considerable amount less than it was worth. The problem, though, for the buyer, was that he did not have the $ 25,000 for the septic, nor would a bank lend money under any traditional loan pro- gram for a property with a failed septic system.

This is where the borrower’s bank referred him to Forte to step in and save the day.

Forte was able to come up with a special Federal Housing Administration 203K Renovation loan that allowed for the financing of the $ 25,000 septic system on top of the $ 210,000 purchase price and required a total down payment of only 3.5 percent of the total amount.

The seller needed to close fast or he was going to have to sell to an even lower cash offer. As an expert in 203K lending, Forte immediately went to work and knew exactly what documents would be needed by the contractor, borrower, attorney, etc., and requested them all immediately. The appraisal was put on a rush order.

Being a direct mortgage lend- er, Forte was able to get his team on board with making this loan a top priority and granted the exception to have it rush reviewed. At the end of the day, the loan closed on time. The borrower only had to put $ 8,225 out of pocket, which was 3.5 percent down, as Forte was able to structure the financing of all the closing costs, including appraisal fee into the loan. The appraised after-improved value of the property was $ 280,000.

With a little creativity, you can walk into an amazing deal by using the right tools like this 203K loan, where this client literally walked into $45,000 in free equity.